Government on Tuesday cleared the release of Rs 33,000 crore in tranches to states and Union Territories to compensate them for revenue loss on account of phasing out of Central Sales Tax for three financial years up to 2012-13. In the first phase, Rs 10,800 crore is payable for 2010-11 as balance CST compensation, sources said.
The decision to release the compensation was taken in the Cabinet meet. There is a provision in the Budget for CST compensation in the revised estimates of 2014-15. "This will be used to release payment to states," sources said. Government has already taken the permission of lok Sabha to release about Rs 11,000 crore as CST compensation. As part of the roll-out of proposed Goods and Services Tax (GST) regime, the CST is being phased out and has been reduced to 2 per cent, from the earlier 4 per cent. The Centre collects CST and distributes it among states.